Tax woes for ex-S.F. manager Baker / Some of his pay went directly to IRS

Los Angeles Dodgers manager Jim Tracy, left, points behind home plate with San Franciso Giants manager Dusty Baker, right, prior to the start of the game at Dodger Stadium in Los Angeles, Friday, July 19, 2002. (AP Photo/Krista Niles) less

Los Angeles Dodgers manager Jim Tracy, left, points behind home plate with San Franciso Giants manager Dusty Baker, right, prior to the start of the game at Dodger Stadium in Los Angeles, Friday, July 19, 2002. ... more

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Los Angeles Dodgers manager Jim Tracy, left, points behind home plate with San Franciso Giants manager Dusty Baker, right, prior to the start of the game at Dodger Stadium in Los Angeles, Friday, July 19, 2002. (AP Photo/Krista Niles) less

Los Angeles Dodgers manager Jim Tracy, left, points behind home plate with San Franciso Giants manager Dusty Baker, right, prior to the start of the game at Dodger Stadium in Los Angeles, Friday, July 19, 2002. ... more

Tax woes for ex-S.F. manager Baker / Some of his pay went directly to IRS

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The Dusty Baker saga took an unexpected turn Friday with the revelation that the state and federal governments have been after him for 12 years over millions of dollars in back taxes, interest and penalties.

Karen Hawkins of Oakland, Baker's tax lawyer, told The Chronicle on Friday that she has been negotiating with the IRS and the state Franchise Tax Board to resolve Baker's debts. His financial troubles date back to tax-shelter investments he made at his brother's behest in the early 1980s when he played for the Los Angeles Dodgers.

She said Baker, like some other high-income Americans, tried to shelter large amounts of interest income earned at a time when rates were in double digits, only to have the government invalidate the write-offs later and demand back taxes.

Hawkins said the former Giants manager has been "incredibly cooperative" with the government and added, "Mr. Baker is not a nonfiler and did not neglect to report all of his income."

Hawkins spoke with Baker on Friday and characterized him as "really disappointed" that his tax problems became public. ESPN broke the story two days after the Giants broke off negotiations on a new contract for Baker, ending his 15-year association with the team.

"He just could not understand at this particular point why anybody made this a newsworthy event. He is a gracious and humble man. He was not about to make accusations toward anybody, but he was enormously pained that somebody decided to leak this information to a news agency, the timing what it is."

The Giants denied that they turned ESPN onto the story.

"Absolutely not," team spokesman Jim Moorehead said. He added that he got assurances from owner Peter Magowan and others in the front office that they were not involved.

General manager Brian Sabean issued a statement saying Baker's tax problems did not enter into his decision to sever the team's ties with the manager.

$1 MILLION LOAN RETURNED

Hawkins said that two years ago, when Baker negotiated his last contract with the Giants, the team agreed to lend him $1 million toward any settlement he made with the government. Baker, according to Hawkins, returned the $1 million to the Giants on Friday.

Baker was said to be so distraught when he learned of the ESPN story he considered canceling a long-planned weekend pheasant-hunting trip, but he ultimately went. Cubs general manager Jim Hendry plans to fly to the Bay Area to interview Baker for their managerial opening on Monday.

Hendry told the Associated Press this issue will have no bearing on Baker's possible future with the Cubs.

IRS FILED NUMEROUS LIENS

According to databases to which The Chronicle subscribes, the IRS beginning in 1990 filed numerous liens against Baker in Sacramento, San Mateo and Los Angeles counties totaling $3.1 million. The largest and most recent was for $2. 3 million in 1998.

John Barrett, a spokesman for the state Franchise Tax Board, said several state liens were filed in those counties as well as San Francisco from 1990 to 1996, the largest being $300,648. Barrett said he was precluded from saying how much Baker currently owes.

The records show that Baker has paid the federal government $408,369 since the first of those liens was filed. The actual amount could be higher if more recent payments are not reflected in the records.

Bill Steiner, spokesman for the IRS for Northern California, said he could not immediately confirm the reported tax debts and repayments.

Hawkins said a tax court ruled in 1997 that write-offs from 1981 and 1982, the final two years at issue, were not legitimate, and the court set Baker's remaining liability at roughly $3.6 million, mostly in interest and penalties.

"Over the last 10 years, Dusty has paid in various ways, and one of the ways the last four or five years was, the IRS has levied his wages from the Giants," Hawkins said.

It was learned the IRS garnished $24,000 a month from Baker's paychecks until 16 months ago. He just completed a two-year contract totaling $5.5 million.

Hawkins said she crunched the numbers after becoming Baker's tax lawyer and decided that the IRS and Franchise Tax Board overestimated the amount of money he owed. She instructed Baker to write a check to cover what she believed his state liability to be, and she has been negotiating with the IRS over the federal liability. Hawkins said she expects that to be resolved within weeks.

"We have had long negotiations, and I think we are very close to a meeting of the minds," she said, adding that the state is waiting for the federal tax issue to be resolved before deciding if Baker has met his state liability.